Worcester Prevails in Tax Setoff Case

Director of Development & Permitting Jennifer KeenerThe Worcester County Commissioners welcomed the recent announcement by the Court of Appeals, which ruled in favor of Worcester County Government (WCG) in the tax setoff case filed by Ocean City.

Beginning in October 2018, Ocean City sought a ruling that the Maryland Tax-Property Article provisions grant certain counties, like Worcester, the ability to deny municipal tax setoff requests violate the Maryland Constitution. Ocean City also requested that the court require all Maryland counties to grant tax setoffs to municipalities within their borders and, specifically, to declare that Worcester County is required to grant tax setoffs to Ocean City or its taxpayers.

Maryland’s highest court held that the law is constitutional. Some counties, like Worcester County, may decide not to have tax setoffs, also sometimes referred to as municipal tax differentials.

WCG issues annual grants to Berlin, Ocean City, Ocean Pines, Pocomoke, and Snow Hill in lieu of tax differentials or tax setoffs to the four municipalities. Specifically, the Commissioners allocate millions of dollars in grant funds annually to Ocean City in the form of unrestricted grants and restricted grants designated to assist with costs for ambulance and fire services, tourism and the convention center, police, and other City services.

In recent years, WCG and Ocean City officials have been working cooperatively to reach an equitable funding agreement that benefits the town without negatively impacting taxpayers who reside outside the town’s corporate limits.

Under Maryland law, some counties can provide a tax setoff to municipal taxpayers (Calvert, Caroline, Carroll, Cecil, Charles, Dorchester, Kent, Queen Anne’s, Somerset, St. Mary’s, Talbot, Washington, Wicomico, Worcester). Still, some counties are legally required to do so (Allegany, Anne Arundel, Baltimore, Frederick, Garrett, Harford, Howard, Montgomery, and Prince George’s).

Read the full opinion here.